Experts at CERA Foresee Higher Electricity Prices
By Elizabeth Souder, The Dallas Morning News
Feb. 15–HOUSTON — Energy Future Holdings chairman Donald Evans agreed with power experts Thursday that electricity prices are bound to rise.
"I don’t see pricing going down anytime in the near future," Mr. Evans said during a panel discussion at the Cambridge Energy Research Associates annual conference.
"So I think there will be adequate incentive for people to look very hard at this area" of energy efficiency, he said.
Experts at the conference said power prices are likely to rise because it’s becoming more expensive to build power plants to meet growing demand, and because cutting carbon dioxide emissions will be costly. Higher natural gas prices have already pushed electricity prices up, and experts doubt fuel prices will drop.
So a number of companies, including Energy Future Holdings, are developing products and services to help consumers conserve.
The question is, how can a power company make more money by encouraging customers to use less of its product?
When asked just that, Mr. Evans said: "Asking Texans to use less electricity is the right thing to do, and that’s why we’re doing it."
Other power executives say offering efficiency services draws more customers. Plus, some companies will charge for such services, creating a new revenue stream.
Experts at the conference offered a list of factors boosting electricity prices.
"Just about all signs point to higher power prices for many years to come," said Jone-Lin Wang, a power expert with CERA.
She said the U.S. must build at least 200 gigawatts of power generation capacity during the next 15 years, plus power lines, just to keep the lights on. One of Energy Future Holdings’ massive new coal plants amounts to about 800 megawatts of capacity, not even one full gigawatt.
And building those plants is becoming more expensive. CERA released a study Thursday that shows costs to build new power plants rose 27 percent in the last 12 months, and 19 percent in just the last six months.
Part of the problem is the sagging exchange rate of the U.S. dollar. American companies shut down their facilities to make major nuclear and coal plant parts. Chunks of the new plants must be imported from Japan or France.
Plus, most observers expect Congress to pass legislation soon to cap carbon dioxide emissions. Coal plant operators would have to either install expensive emissions equipment or buy credits for their emissions.
These costs will have to be borne by consumers to keep the power industry afloat, Ms. Wang said.
Retail electricity companies see a business opportunity here. Many are planning to help consumers reduce their electricity use, either for a fee, or to attract new customers.
Direct Energy already offers an advice service, to help customers make their homes as efficient as possible. And the company is considering ways to employ new high-tech meters to help customers regulate power usage.
That doesn’t mean every customer’s bill will go down, just that an efficient customer’s bill wouldn’t rise so quickly.
"It’s easy to confuse energy efficiency with using less of a product," said Direct Energy chief executive Deryk King in an interview.
Demand for electricity is on the rise, he said, as people buy more gadgets and upgrade to energy-gobbling plasma televisions.
In past decades, state regulators have funded efficiency projects, by paying for upgrades or reminding people to turn the lights off. Some executives say this approach is all wrong.
James Rogers, chief executive of Duke Energy Corp., said most people don’t sit around thinking about their utility bills all the time.
"It’s back of mind. We spend a lot of money trying to make it front of mind, and that’s a failed approach," he said.
He’d prefer to see regulators come up with a way to pay utilities for saving a kilowatt of power, rather than just for producing a kilowatt of power.
Mr. King of Direct Energy doesn’t want regulators involved in the process at all. He’d prefer to see electricity prices reflect the true, high cost of producing clean power, and allow private companies to offer products and services to help consumers deal with it.
In that way, the higher prices might goad people to conserve.
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